STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
ZENITH INSURANCE COMPANY,
vs.
Petitioner,
Case No. 18-3844
DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION, MEDICAL SERVICES,
Respondent.
/
RECOMMENDED ORDER
Administrative Law Judge Hetal Desai of the Division of Administrative Hearings (DOAH) held a final hearing in this matter in Tallahassee, Florida, on November 29, 2018.
APPEARANCES
For Petitioner: Ralph Paul Douglas, Esquire
McConnaughhay, Coonrod, Pope, Weaver & Stern, P.A.
Suite 200
1709 Hermitage Boulevard
Tallahassee, Florida 32308
For Respondent: Tabitha G. Harnage, Esquire
Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399
Thomas Nemecek, Esquire Department of Financial Services Division of Workers’ Compensation
200 East Gaines Street Tallahassee, Florida 32399
STATEMENT OF THE ISSUES
Whether Respondent, Department of Financial Services, Division of Workers’ Compensation, Medical Services (the Department), correctly determined the amount of reimbursement Petitioner, Zenith Insurance Company (Zenith), owes to Lawnwood Regional Medical Center (Lawnwood) for medical services, pursuant to section 440.13(7), Florida Statutes (2018).1/ More specifically, the issues raised in this case are:
whether Zenith properly adjusted or disallowed payment by paying what it believed were “reasonable” charges for the Workers’ Compensation medical services provided;
whether the Department’s consideration of a “Stop-Loss” percentage-based methodology, as opposed to a per diem rate, may serve as a basis for reimbursement; and
what, if any, is the additional amount Zenith owes to Lawnwood for reimbursement in this case.
PRELIMINARY STATEMENT
On April 22, 2016, the Department received a Petition for Resolution of Reimbursement on behalf of Lawnwood. Zenith filed its response with the Department on May 12, 2016. On July 5, 2016, the Department issued a Reimbursement Dispute Determination finding the “Total Correct Reimbursement Amount” was $122,271.23. This amount was calculated without consideration of any past payment by Zenith. The total amount was based on a Stop-Loss
formula2/ and based on the Department’s application of a proposed rule disregarding contractual arrangements between medical service providers and insurance carriers. That proposed rule was invalidated in Florida Society of Ambulatory Surgical Centers, Inc. v. Department of Financial Services, Case No. 17-3025RP
(Fla. DOAH Nov. 30, 2017)(FSASC final order). Based on the FSASC final order, the Department issued a Reimbursement Dispute Amended Determination on June 14, 2018; and a Reimbursement Dispute Second Amended Determination to correct a scrivener’s error on June 21, 2018.
On July 17, 2018, Zenith filed a Petition for a Section 120.57(1), F.S. Administrative Hearing with the Department, which was referred to DOAH along with the Reimbursement Dispute Amended Determination dated June 14, 2018.
On August 8, 2018, the Department was ordered to notify Lawnwood of the proceeding and the date of the final hearing. The Department filed and served a Notice to Potential Party on August 22, 2018. The Notice indicated Lawnwood may have a substantial interest in these proceedings, and provided the manner for Lawnwood to intervene. Lawnwood did not move to intervene and did not participate in these proceedings.
After one continuance (due to Hurricane Michael), the final hearing was noticed for November 29, 2018. On November 27, 2018, the Department filed a Motion in Limine to Exclude Opinion
Testimony of Kevin McCarty. That motion was granted by separate order on April 11, 2019.
At the final hearing, the undersigned granted an ore tenus
motion made by the Department to amend the Reimbursement Dispute Second Amended Determination. The Reimbursement Dispute Third Amended Determination (the Third Determination) was admitted as DFS Exhibit 46, and was filed with DOAH on November 30, 2019.
The Third Determination requires a total reimbursement amount of
$110,859.24; or an additional reimbursement owed by Zenith in the amount of $79,014.54.
The following exhibits were admitted into evidence: Joint Exhibits 1 through 7; Zenith’s Exhibits 8 through 13, 16, 17, 22,
27, 32 through 34, 36 through 40, and 47; and the Department’s Exhibits 41 through 46. Official recognition was given to Zenith’s Exhibits 18 through 21, 24 through 26, 28, and 30.
Zenith’s Exhibits 14 and 15 were admitted for a limited purpose as reflected in the Amended Order Granting Respondent’s Motion in Limine, rendered April 12, 2019.
Zenith presented the testimony of Carol Brodie, its corporate representative. The Department presented the testimony of Lynne Metz, a registered nurse consultant with the Department, and Andrew Sabolic, an assistant director of the Division of Workers’ Compensation. The deposition transcripts of Linda Joy, a nurse case manager and bill auditor for Zenith, and Katherine
Trotter, a legal manager for Parallon Business Performance Group (Parallon), were also admitted as part of the record.
The Transcript of the final hearing was filed on January 15, 2019; and the final proposed exhibits with redactions were jointly submitted on March 14, 2019.3/
The parties were granted two extensions of time to file their proposed recommended orders (PROs), and were granted an enlargement of the page limitations set forth in Florida Administrative Code Rule 28-106.215. Each party timely filed their PRO on February 28, 2019, and both have been considered.
The parties filed a Joint Pre-hearing Stipulation on October 8, 2019, containing an extensive set of facts and recitations of the law, which are incorporated below where appropriate and cited as “Jt. Stip. Fact ¶.” 4/
FINDINGS OF FACT
Parties and Participants
The Department is the state agency responsible for administration of the Florida’s Workers’ Compensation process set forth in chapter 440. As such, it has exclusive jurisdiction to decide any matters concerning reimbursement for medical services under this process. See § 440.13, Fla. Stat.
Zenith is a carrier as defined by section 440.13(1)(c).
Lawnwood, a non-party, is a health care facility as defined by section 440.13(1)(g). Lawnwood is part of a network
known as East Florida Division, Inc. (East Florida), a division of HCA Inc.
Parallon, a non-party, manages the billing, revenue cycle management, and reimbursement dispute process for certain hospitals, including Lawnwood. (Jt. Stip. Facts, ¶¶ 33 and 34). Parallon filed the Petition for Resolution of Reimbursement Dispute in this case on behalf of Lawnwood.
Coventry Health Care Workers Compensation, Inc., and/or Coventry Life and Health Insurance Company on behalf of First Health Group Corp. (Coventry), serves as a “middleman” between insurance carriers and health care providers. As explained by Carol Brodie, Coventry offers carriers, such as Zenith, access to special rates it has negotiated with health care facilities and providers. Essentially, Zenith is a third-party beneficiary of the rates negotiated between East Florida and Coventry.
Medical Services at Issue
Lawnwood provided health services to a workers’ compensation patient (patient) from January 21 through 25, 2016.
The patient was to be treated for a routine outpatient surgical procedure to release an extensor tendon of his index finger. According to the unrefuted testimony of Linda Joy (a Zenith employee), the surgeon inadvertently cut the patient’s digital nerve, artery, and vein. This resulted in more extensive treatment than originally contemplated. The patient was
ultimately admitted to the hospital for inpatient care, and released four days later.
Payment Dispute
Lawnwood issued a bill to Zenith for $163,697.30 (Lawnwood bill) for the services and treatment it provided to patient.
Zenith regularly audits bills it receives from health care providers and makes adjustments if necessary. These adjustments are provided to the health care provider along with the payment in the form of an Explanation of Bill Review (EOBR). The EOBR goes through each itemized line in a bill and explains to the provider what was reduced and why.
In this case, Zenith sent the Lawnwood bill to Ms. Joy for review. She reviewed the patient’s relevant medical records, as well as billing documentation, and a coding summary sheet (containing codes for procedures, medications, and other services utilized by the health care and insurance industry) from Lawnwood.
Ms. Joy opined the Lawnwood bill was very high for the services provided.
Both of the Department’s witnesses also felt the amount billed by Lawnwood was unexpected. Andrew Sabolic (an assistant director at the Department) was surprised at Lawnwood’s bill, stating: “it was an amount that I didn’t anticipate a hospital
would charge for those types of services.” Similarly, Lynne Metz (a Department employee) testified: “The charges were high compared to what I would expect.” The Department has not made any determination or review of whether the bills or charges submitted by the hospital are reasonable for the services provided. (Jt. Stip. Fact, ¶ 28).
Ms. Joy and other Zenith staff compared the charges and the information on the coding summary sheet with payments of other similar providers through a medical revenue and billing database program, known as “OPTUM 360 Revenue Cycle Program” (OPTUM360).
In making the comparison, Zenith also utilized databases and benchmarks that are accepted in the industry, including Medicare, the MediSpan Drug Database, Health Care Blue Book, Health Engine, other state’s workers’ compensation reimbursement formulas, usual and customary charges, and other hospitals’ charges in the same zip code as Lawnwood.
Based on the OPTUM360 results and its own analysis, Zenith calculated the total reimbursement amount acceptable to other health care providers under Medicare for the same treatment and services would be $11,173.81.
As a result, Zenith issued an EOBR that adjusted the Lawnwood bill and indicated, “THIS BILL HAS BEEN PRICED IN ACCORDANCE WITH THE TERMS OF YOUR CONTRACT WITH COVENTRY
NATIONAL.” Along with the EOBR, Zenith provided benchmark data to Lawnwood to support its repricing, editing or adjustment of the bills at issue. (Jt. Stip. Facts, ¶¶ 36 and 37).
In the EOBR, Zenith used four explanation codes: “47,” “81,” “92,” and “93,” as authorized by Florida Administrative Code Rule 69L-7.740(13)(a) and (b), to explain why payment was disallowed or adjusted.
Code “47” (Payment disallowed: insufficient documentation: invoice or certification not submitted for implant) was used for the disallowance on a line item for an implant. Id. The parties agree that was appropriate.
Code “81” (Payment adjusted: billing errors: payment modified pursuant to charge audit) was used for the line items other than the disallowed implant charge, based on Zenith’s review of the entire bill, line by line, and resulting adjustment. Id.
Code “92” (Paid: no modification to information provided on the medical bill: payment made pursuant to workers’ compensation reimbursement manual for hospitals) was used because it is generally on all hospital bills. Id.
Code “93” (Paid: no modification to information provided on the medical bill: payment made pursuant to written contractual arrangement) was used because Zenith had a contract
with Coventry, and Coventry had an agreement with East Florida and Lawnwood.
The Department has not adopted a rule establishing an EOBR code (or similar descriptive explanation) to be used by a carrier when the carrier identifies a bill or charge from a hospital that the carrier deems to be so excessively high so as to be an unreasonable basis for reimbursement under the Florida Worker’s Compensation Law. (Jt. Stip. Fact, ¶ 8). In other words, there is no code in rule 69L-7.740 for disputing a line item as being “unreasonable” or “too high.”
Based on the repriced and adjusted bill, Zenith reimbursed Lawnwood $31,844.70 for the medical services provided. (Jt. Stip. Fact, ¶ 40). This amount was approximately three times the OPTUM360 amount of $11,173.81. When asked how Zenith made the decision to give three times the OPTUM360 amount,
Ms. Brodie explained:
We didn’t take the [OPTUM360] Medicare payment or even 120 or 140 percent of Medicare, which we thought was more than fair. . . . So because Florida -- I don't want to say they're problematic, but Florida bills, we're seeing such an increase in the amount of billed charges and we're seeing a lot of disputes when we don't pay to the penny of what the expected amount is, that we were trying to go above and beyond and try to make our payment more palatable, I guess, to the provider. So we wanted to be more than generous, so we came up with three times Medicare.
Catherine Trotter (a Parallon employee) Parallon filed a request for reconsideration of the EOBR with Zenith after Lawnwood had reviewed it and determined $31,844.70 was insufficient.
On April 18, 2016, Parallon, on behalf of Lawnwood, filed a Petition for Resolution of Reimbursement dispute with the Department challenging the EOBR and demanding additional payment.
Based on Ms. Joy’s testimony, Zenith did not contest the medical necessity of the services provided by Lawnwood, nor was there evidence Zenith claimed overutilization (the appropriateness of the level and quality of health care provided to the patient). Rather, Zenith claimed, and still claims in these proceedings, it did not pay the billed amount because the individual charges were unreasonable.
Contract Provisions
Zenith and Parallon, on behalf of Lawnwood, agree that a reimbursement contract applies to this dispute. (Jt. Stip. Fact, ¶ 35). The Department also based the Third Determination on the contract provisions.
The parties disagree, however, as to what contract provisions apply and how they should be applied. At the hearing, the parties also disputed whether the Department was provided with the applicable contractual provisions during the petition process. The undersigned need not determine who sent what to
whom, because this is a de novo proceeding; and what matters is
the evidence admitted at the hearing. See 120.57(1)(k), Fla. Stat.; Haines v. Dep’t of Child. & Fams., 983 So. 2d 602, 606
(Fla. 5th DCA 2008).
No contract directly between Zenith and Lawnwood was presented at the hearing.
The following documents, however, establish the agreement between Coventry and Lawnwood: (1) Amendment to Model Facility Agreement executed January 20, 2015 (MFA Amendment);
Appendix A, “Payment Rate” (Appendix A); and
Attachment 1, “Participating Facility List (Attachment 1); and (4) Amendment to Model Facility Agreement between Lawnwood and Coventry (also known as First Health), effective October 1, 2006 (Lawnwood Amendment). Parallon’s legal manager testified the MFA Amendment, Appendix A, Attachment 1, and the Lawnwood Amendment were the only contract provisions relevant to the reimbursement determination.
These documents set the rates for Coventry (and its network clients such as Zenith), but do not provide definitions or terms that may have been included in the original “Model Facility Agreement.”
Nonetheless, the Lawnwood Amendment defines the “Workers’ Compensation Contract Rate” as follows: “the amount payable under the terms of this Contract shall be the lesser of
the Contract rate or a 5% discount from the amount payable under hospital guidelines established under any state law or regulations pertaining to health care services rendered to occupationally ill/injured employees.”
Therefore, to make a determination of how much is owed, findings must be made as to what is the “Contact rate,” and what is the amount payable under “any state law or regulations” governing workplace injuries (State rate).
Relevant to determining the “Contract rate,” Paragraph 3 of the MFA Amendment provides the following under
“Rates”:
The current rate reflected on Appendix A to the Agreement shall be increased by 3% for inpatient dates of admission and/or outpatient dates of service occurring on and after October 1, 2014.
Appendix A contains a table depicting inpatient rates for Lawnwood as “35% Discount from Hospital’s Total Billed
Charges.” (emphasis added).
Because the services were provided after October 2014, the 35 percent discount reduced by the three percent discount results in Lawnwood’s expected contractual reimbursement rate to be 68 percent of the “Hospital’s Total Billed Charges,” from any of Coventry’s clients, including Zenith. Thus, the applicable Contract rate is 68 percent of the total bill submitted by Lawnwood.
Zenith disputes the meaning of “Hospital’s Total Billed Charges” and argues for application of a “reasonableness” standard to this term. In support of this assertion, Zenith offers the following documents which relate to the agreement between Zenith and Coventry: (1) the Workers’ Compensation Network Services Agreement effective November 1, 2008, (Network Agreement); (2) Supplement A to the Network Agreement, titled “Network Access” (Supplement A); and (3) the Sixth Amendment to the Network Agreement executed November 24, 2015 (6th Amendment).
The Network Agreement, Supplement A, and 6th Amendment are heavily redacted. Regardless, it is clear these documents classify Zenith as a “client,” who pays Coventry for access to a discounted rate for medical services with a “Contract Provider.” The Contract Provider and Coventry have a separate “provider agreement” setting this discounted rate.
Although, the terms “contract rates,” “fee,” and “provider fee schedule,” are all defined in the Network Agreement Coventry has with Zenith, the definitions or explanation of these terms are redacted. Thus, there is no evidence these terms apply to the Lawnwood bill or the rate established between Coventry and Lawnwood. Similarly, Supplement A defines “Bill” but is also redacted. Regardless, based on the inclusion of these sections in the Network Agreement and attachments, Zenith and Coventry knew how to define special terms. If they intended to give a
special meaning to the term “Hospital’s Total Billed Charges,” they could have done so.
Section 2.2 of the 6th Amendment states, “[Zenith] agrees that the Contract Rate shall be applied to bills received from [Lawnwood] and further agrees that no other rates . . . shall be applied to such bills.” (emphasis added). Again, without any evidence to the contrary, “bills received” applies to the Lawnwood bill.
Although Zenith argues the remaining language in section 2.2 allows it to “modify, edit or otherwise dispute any bill,” this modification must be done pursuant to the contract and workers’ compensation laws and regulations. As stated before, the EOBR regulations do not contemplate adjustments to be based on the reasonableness or fairness of prices or charges. More importantly, there is no basis in the contract provisions or state law and regulations allowing Zenith to reimburse Lawnwood in the amount of three times the OPTUM360 amount. As explained in the Conclusions of Law, the undersigned also cannot infer this as a basis for modification of the reimbursement amount.
Zenith also cites to section 2.6 of Supplement A to justify its repricing based on the OPTUM360 results and other industry-used benchmark comparison data. That section, titled “Benchmarking Database,” states, “In the event [Zenith] . . . performs a bill review or repricing function on [Lawnwood’s]
bills, Zenith shall . . . update at least twice annually and utilize a nationally accepted charge-benchmarking database to determine the proper percentile of charges in the applicable zip code as approved by Coventry and Client.”
Granted this section contemplates that benchmark databases can be used by Zenith in repricing bills, but it speaks to the proper percentile of charges, not the reasonableness of the underlying prices or charges. There was no evidence Coventry approved a “proper percentile of charges” as required.
The undersigned finds there is no language in the redacted versions of the Network Agreement, Supplement A, or 6th Amendment that changes Zenith’s requirement (as Coventry’s client) to pay the lesser of (1) 68 percent of the “Hospital’s Total Billed Charges” or (2) 5 percent less than the rate provided pursuant to applicable state laws and regulations.
Finally, Zenith argues that the definition provided in a Coventry contract with an undisclosed health care provider, titled “Workers’ Compensation Product Addendum,” should be used to determine the meaning of the term “Hospital’s Total Billed Charges.” See Zenith’s PRO, p. 22-23 (“By implication, these are all in the same network and use the same contractual provisions.”). This document (Zenith’s Exhibit 39) provides definitions, if applicable, that could have been helpful in addressing Zenith’s arguments. For example, this document ties
the amount owed by a Coventry client to an “allowable amount” and “eligible bill charges.” There is no evidence, however, that Zenith’s Exhibit 39 was executed by Lawnwood (or East Florida), or that the provisions in this document were part of any agreement between Coventry and Lawnwood, or Coventry and Zenith. As such, the undersigned finds it is not applicable to these proceedings.
Applying the Contract rate--68 percent of the “Hospital’s Total Billed Charges” indicated in the Network Agreement and attachments--to the Lawnwood bill would require Zenith to provide a total amount of $110,859.24, or an additional amount of $79,014.54.
The Workers’ Compensation System
The analysis does not stop there. The next step is to determine how much would be owed at “a 5% discount from the amount payable under hospital guidelines established under any state law or regulation pertaining to health care services rendered to occupationally ill/injured employees.” The undersigned finds this provision refers to the laws and regulations under Florida’s workers’ compensation system set forth in chapter 440 and the Department’s rules.
In making the determination decisions in this case, the Department used the Florida Workers’ Compensation Reimbursement
Manual for Hospitals, 2014 Edition, and incorporated by reference in rule 69L-7.501 (HRM).
The HRM generally provides for reimbursement based on either a per diem fee or the amount agreed upon by contract between the carrier and medical services provider. Under the section titled “Reported Charges,” the HRM provides: “charges for hospital inpatient services shall be reimbursed according to the Per Diem Fee Schedule provided in this chapter or according to a mutually agreed upon contract reimbursement agreement between the hospital and the insurer.” HRM at 15.
“Per Diem” is defined as “a reimbursement allowance based on a fixed rate per calendar day which is inclusive of all services rather than on a charge by charge basis.” HRM at 35.
In certain circumstances when provider bills are in excess of $59,891.34, a per diem rate is not used. Rather, the HRM provides that the reimbursement amount is calculated using a percentage methodology of 75 percent of the billed charges. This “Stop-Loss Reimbursement” is defined as “a reimbursement methodology based on billed charges once reaching a specified
amount that is used in place of, and not in addition to, per diem reimbursement for an inpatient admission to an acute care hospital or a trauma center.” HRM at 17 and 35 (emphasis added).
As explained below, the Stop-Loss methodology conflicts with section 440.13(12)(a), which specifically provides for
establishment of a maximum reimbursement amount (MRA) based on a per diem rate for inpatient hospital care.5/
Applying the State rate--the per diem rate set forth in the HRM--Lawnwood would receive $3,850.33 per day, except for the day of discharge, which equals $11,550.99. HRM at 16.
Applying the five percent discount, as set forth in the Lawnwood Amendment, to the $11,550.99 amount, the total amount payable by Zenith to Lawnwood equals $10,973.44.
Because the State rate is less than the amount calculated using the Contract rate, the undersigned finds Zenith owed Lawnwood a total reimbursement amount of $10,973.44, which is less than the $31,844.70 already paid by Zenith.
CONCLUSIONS OF LAW
I. Jurisdiction
DOAH has jurisdiction over the subject matter and of the parties to this proceeding. §§ 440.13, 120.569 and 120.57(1), Fla. Stat.
Zenith urges the undersigned (and the Department) to impose a “reasonableness” standard to the underlying charges subject to the contractual formula (68 percent of the “Hospital’s Total Billed Charges”). It does so because it claims Lawnwood’s charges are “outliers,” and that Lawnwood (and other hospitals) are “gaming” the workers’ compensation system to reach the
$59,891.34 threshold in the HRM in order to qualify for the
percentage-based Stop-Loss reimbursement formula. The Department has taken the position that because there is a contract, the hospital can charge an unlimited rate, price, or bill, for services to the Florida workers’ compensation health care system, as long as the parties abide by the terms of their contract.
(Jt. Stip. Facts, ¶¶ 15 and 19).
Zenith asks for a construction of the term “Hospital’s Total Billed Charges” as used in the Coventry-Lawnwood contract. But before any court can construe a term in a contract, there must be an ambiguity. See Gold Crown Resort Mktg. v. Phillpotts,
2019 Fla. App. LEXIS 6493, at *4-5 (Fla. 5th DCA Apr. 29, 2019).
As explained in Gold Crown:
Contracts should be construed to give effect to the intentions of the parties. Whitley v. Royal Trails Prop. Owners’ Ass’n, 910 So. 2d 381, 383 (Fla. 5th DCA 2005). When the terms of a contract are unambiguous, the parties' intent must be determined from within the four corners of the document. In the absence of ambiguity, the language itself is the best evidence of the parties’ intent and its plain meaning controls. The canons of construction cannot be used when the contract is unambiguous as there is no need for judicial construction. Antoniazzi v. Wardak, 259 So. 3d 206, 211 (Fla. 3d DCA 2018). (quotations and some citations omitted).
Here, the relevant contract provisions provide for two unambiguous alternatives--the State rate with a five percent discount or the Contract rate. Additionally, the State rate is less than the Contract rate, regardless of whether Zenith’s
amount ($31,844.70) or Lawnwood’s amount ($163,697.30) is used for the “Hospital’s Total Billed Charges.” Thus, there is no need to interpret the contract or infer the meaning of this term.
To be clear, the undersigned and the Department must apply the terms agreed to by the carrier and medical provider, as explained in the FSASC final order:
122. Here, Respondent plainly has statutory authority to resolve reimbursement disputes, and indeed, is given exclusive jurisdiction to decide any matters involving reimbursement. § 440.13(11)(c), Fla. Stat. Just as JCCs have the authority to construe contracts in carrying out their statutory authority under the workers' compensation system, so too, Respondent has the authority to construe contracts to determine reimbursement terms, in order to carry out its statutory duty to determine whether a carrier improperly adjusted or denied payment and order prompt payment when a carrier has underpaid. (emphasis added).
Fla. Society of Ambulatory Surgical Centers, Inc. v. Dept. of Fin. Servs., Case No. 17-3025RP, 2017 Fla. Div. Adm. Hear. LEXIS
705, at *80-81 (Fla. DOAH Nov. 30, 2017)
The authority, however, is not limitless. Rather, just as “a JCC is not a court of general jurisdiction, and cannot reform contracts or effect a remedy not provided for in chapter 440,” Bend v. Shamrock Services, 59 So. 3d 153, 156 (Fla. 1st DCA
2011) (internal citations omitted), the undersigned cannot reform the contract or impose a standard that has not been agreed to by the parties provided for in chapter 440.
Therefore, the undersigned declines to apply the canons of construction to determine what was intended by the parties or infer a “reasonableness” standard to the amount billed by Lawnwood.
Zenith also argues there is a reasonableness standard for health care costs imposed by chapter 440. See Pet’r. PRO,
p. 58 (“Sections 440.015 and 440.13(12), Fla. Stat., mandate that each and every medical payment must be defensible as a reasonable and adequate cost to the system”.) It also argues the carrier has the right, if not the duty, to challenge the reasonableness of payments, citing section 440.13(6); and Catron Beverages, Inc. v. Mavnard, 395 So. 2d 261, 262 (Fla. 1st DCA 1981). See Pet’r
PRO p. 47. These references, however, do not support Zenith’s position.
First, section 440.015 does mention costs, but only in the context of “cost to the employer” and the “cost-effective delivery of payments.” There is no reference to health care costs or reasonable costs for treatment and services.
Section 440.13 also addresses reimbursement fees and charges, but directs a three-member panel to address what is reasonable:
Reimbursement for all fees and other charges for such treatment . . . by any hospital . .
. must not exceed the amounts provided by the uniform schedule of maximum reimbursement allowances as determined by the panel or as
otherwise provided in this section . . . .
In determining the uniform schedule, the panel shall first approve the data which it finds representative of prevailing charges in the state for similar treatment, care, and attendance of injured persons. Each health care provider . . . shall maintain records verifying their usual charges. In establishing the uniform schedule of maximum reimbursement allowances, the panel must consider:
The levels of reimbursement for similar treatment, care, and attendance made by other health care programs or third-party providers;
The impact upon cost to employers for providing a level of reimbursement for treatment, care, and attendance which will ensure the availability of treatment, care, and attendance required by injured workers;
The financial impact of the reimbursement allowances upon health care providers and health care facilities, including trauma centers as defined in s. 395.4001, and its effect upon their ability to make available to injured workers such medically necessary remedial treatment, care, and attendance.
The uniform schedule of maximum reimbursement allowances must be reasonable, must promote health care cost containment and efficiency with respect to the workers’ compensation health care delivery system, and must be sufficient to ensure availability of such medically necessary remedial treatment, care, and attendance to injured workers; and
The most recent average maximum allowable rate of increase for hospitals determined by the Health Care Board under chapter 408.
§ 440.13(12)(d), Fla. Stat. (emphasis added). Nonetheless, section 440.13(12)(a) provides that an individual hospital can set its own reimbursement amount by agreement:
An individual physician, hospital, ambulatory surgical center, pain program, or work- hardening program shall be reimbursed either the agreed-upon contract price or the maximum reimbursement allowance in the appropriate schedule.
§ 440.13(12)(a), Fla. Stat. (emphasis added).
Section 440.13(6) also does not address the “reasonableness” of medical cost, but rather is limited to the identification of “overutilization and billing errors.”
Finally, Catron actually supports the conclusion that the Legislature knows how to impose a “reasonableness” standard if that was its intent. Notably, the Catron court ultimately
found the carrier’s challenge was frivolous because the charges for the prescription medication were “customary and reasonable in the community” as required by the statute in effect at that time, which provided:
All fees and other charges for treatment or services shall be limited to such charges as prevail in the community for similar treatment of injured persons of like standard of living and shall be subject to rules adopted by the division, which shall adopt schedules of maximum charges for such treatment of services. An individual health care provider shall be paid either his usual and customary charge for a treatment or service or the maximum charge, whichever is less. A hospital shall be paid the lowest
charge currently assessed for such treatment or service in the community in which the hospital is located.
§ 440.13(3)(a), Fla. Stat. (1979) (found at https:// fall.fsulawrc.com/collection/FlaStat/FlaStat1979/vol2/FlaStat1979 v2_OCR_Part18.pdf.). This language is no longer found in the statute.
If Zenith and Lawnwood had no agreement, the reimbursement would have been subject to the MRA set by the three-member panel pursuant to section 440.13(12), which states that the “[t]he maximum reimbursement allowances for inpatient hospital care shall be based on a schedule of per diem rates, to be approved by the three-member panel.” § 440.13(12)(a), Fla.
Stat.
A review of subsection (12) of the current statute also
indicates the Legislature knows how to impose a standard for what should be considered reasonable medical costs and charges, but chose not to do so for inpatient care reimbursement. For example, for outpatient care, the statute provides: “All compensable charges for hospital outpatient care shall be reimbursed at 75 percent of usual and customary charges, except as otherwise provided by this subsection.” § 440.13(12)(a), Fla. Stat. (emphasis added).
For drug costs, the Legislature is even more precise, and allows parties to negotiate reimbursement at the fee schedule
amount unless there is a contract provision allowing a lesser
amount:
As to reimbursement for a prescription medication, the reimbursement amount for a prescription shall be the average wholesale price plus $4.18 for the dispensing fee. For repackaged or relabeled prescription medications dispensed by a dispensing practitioner as provided in s. 465.0276, the fee schedule for reimbursement shall be
112.5 percent of the average wholesale price, plus $8.00 for the dispensing fee. For purposes of this subsection, the average wholesale price shall be calculated by multiplying the number of units dispensed times the per-unit average wholesale price set by the original manufacturer of the underlying drug dispensed by the practitioner, based upon the published manufacturer’s average wholesale price published in the Medi-Span Master Drug Database as of the date of dispensing. . . .
Fees for pharmaceuticals and pharmaceutical services shall be reimbursable at the applicable fee schedule amount except where the employer or carrier, or a service company, third party administrator, or any entity acting on behalf of the employer or carrier directly contracts with the provider seeking reimbursement for a lower amount.
§ 440.13(12)(c), Fla. Stat. (emphasis added). Unlike section 440.13(12)(d), cited above, which allows a hospital to accept a higher or lower rate than that set by the three-member panel, for drug reimbursement purposes, the hospital must accept the lower amount between the fee schedule rate and the contract rate.
The Legislature has also imposed a “reasonableness” requirement to other items listed in section 440.13, such as time
limits for providing medical treatment, section 440.13(2)(c); access to medical information, section 440.13(4)(c); timing of independent medical examinations, section 440.13(5)(c); attorney’s fees, section 440.13(7)(f)3.; and defining the elements of necessary medical care, section 440.13(15)(c).
Again, had the Legislature wanted to set a “reasonableness” standard for inpatient hospital charges, it could have cited to the numerous sources that Petitioner urges the undersigned to consider. Instead, it directed the three- member panel to determine what was reasonable, and told the panel what to consider in setting these rates. § 440.13(12)(d), Fla. Stat.
Zenith and Lawnwood elected not to be bound by what the three-member panel deemed to be reasonable, but rather entered into its own agreement regarding medical costs and payment. Notably, Zenith’s contract with Coventry defined “bill” (although it was redacted) and Coventry’s contract with another medical provider contained a definition of “Eligible Billed Charge” (Zenith’s Exhibit 39). Had Zenith wanted a definition of the “Hospital’s Total Billed Charges” to be included in its agreement, it could have done so. See generally Churchville v.
GACS Inc., 973 So. 2d 1212, 1216 (Fla. 1st DCA 2008)(noting
courts are “unable to rewrite the clear and unambiguous terms of
a contract . . . even when the contractual terms bind a party to a seemingly harsh bargain[.]” (internal citations omitted)).
As such, the undersigned has no jurisdiction or authority to impose a “reasonableness” standard on the charges submitted by Lawnwood, especially where the Legislature and the parties to the contract have not done so.6/
The Stop-Loss Formula Contravenes Section 440.13(12)(a)
As noted above, the Department arrived at the amount owed by Zenith in the previous determinations by applying the Stop-Loss method, which applies a percentage formula to determine the reimbursement amount for inpatient care where the charges meet or exceed $59,891.34. Similarly, in analyzing which formula to apply (the contractual 68 percent or the statutory allowable amount) for the Third Determination, the Department applied the Stop-Loss formula to the charges billed by Lawnwood, and found the 68 percent rate applied. Zenith argues the use of the Stop- Loss formula contravenes the statute and is an invalid exercise of legislative authority.
An existing rule is an invalid exercise of delegated legislative authority if the rule “enlarges, modifies, or contravenes the specific provisions of law implemented.”
§ 120.52(8)(c), Fla. Stat. To determine if a rule contravenes the implementing statutory authority, both the statute and rule must be reviewed to assess whether the rule gives effect to the
implementing law and whether the rule interprets the law's specific powers and duties. See Bd. of Trs. of Int. Imp. Trust Fund v. Day Cruise Ass'n, 794 So. 2d 696, 704 (Fla. 1st DCA
2001).
The rule at issue is a portion of rule 69L-7.020 and is found in chapter 5 of the HRM. It states:
Exceptions to Per Diem | Before calculating the amount of reimbursement for inpatient services according to this Chapter, charges for surgical implant(s) shall be separated out from the total gross charges for which reimbursement is requested. If the Total Gross Charge After Implant Carve-Out is over $59,891.34 reimbursement shall be determined according to the Stop-Loss Reimbursement method. |
Stop-Loss Reimbursement | If the Total Gross Charge After Implant Carve-Out exceeds $59,891.34, the hospital shall be reimbursed seventy-five percent (75%) of the Total Gross Charge After Implant Carve-Out, except as otherwise provided in this Manual. |
HRM at 17.
Section 440.13, however, only allows a per diem methodology. It provides in relevant part:
The maximum reimbursement allowances for inpatient hospital care shall be based on a schedule of per diem rates to be approved by the three-member panel no later than March 1, 1994, to be used in conjunction with a pre- certification manual as determined by the Department, including maximum hours in which
an outpatient may remain in observation status, which shall not exceed 23 hours. (emphasis added).
§ 440.13(12)(a), Fla. Stat.7/
Here, the statute requires a per diem rate, and there is no statutory language allowing an exception to using a per diem formula for inpatient care reimbursements. Where there is a conflict between a statute and an administrative rule, the statute takes precedence. See State of Fla., Dep’t of Ins. v.
Ins. Servs. Off., 434 So. 2d 908 (Fla. 1st DCA 1993); One Beacon Ins. v. Ag. for Health Care Admin., 958 So. 2d 1127 (Fla. 1st DCA
2007).
In Southern Baptist Hospital of Florida, et. al. v.
Agency for Health Care Administration, Case No. 1D17-2027, slip. op. (Fla. 1st DCA April 26, 2019), the court addressed a similar
issue related to the validity of existing and proposed rules setting forth methodologies related to Medicaid outpatient services. The petitioner hospitals in Southern Baptist, argued
the administrative rules were invalid exercises of delegated legislative authority. The court noted that no deference was to be given to the state agency as to the validity of the rule. Id. at 34. Even if deference was given, “[b]ased on the clear and unambiguous language of the statute, the Agency was required to adopt a rule setting forth the methodology by which it would reimburse Medicaid providers.” Id. The court concluded that
both the existing and proposed rules were invalid under section 120.52(8)(c), because they did not implement the methodology required by the statute. Id. at 35-37.
In this case, because the Department adopted a methodology other than a per diem formula, the Stop-Loss formula contravenes section 440.13(12)(a), and is therefore invalid.
Section 120.57(1)(e)1. prohibits the undersigned from utilizing a rule that is an invalid exercise of delegated legislative authority:
An agency or an administrative law judge may not base agency action that determines the substantial interests of a party on . . . a rule that is an invalid exercise of delegated legislative authority. This subparagraph does not preclude application of valid adopted rules and applicable provisions of law to the facts.
Because the Stop-Loss formula contravenes the implementing statute’s per diem requirement, neither the undersigned nor the Department can calculate the final reimbursement amount using this formula. See also Bloch Bros.
Corp. v. Dep’t of Bus. Reg., 321 So. 2d 447, 448 (Fla. 2d DCA 1975)(noting when Legislature mandates an administrative power be exercised one way, it cannot be done another way). To the extent the Stop-Loss amount is calculated using a percentage formula, it must give way to the clear requirements of the statute providing only for a per diem formula. Willette v. Air Prods., 700 So. 2d
397, 399 (Fla. 1st DCA 1997)(finding where administrative rule conflicted with chapter 440, Florida Statutes, the statute controlled; noting “[w]e reject the Department’s contention that a court must give an administrative rule effect, unless it has been invalidated in proceedings under section 120.56, even if the rule is unmistakably at odds with clear statutory language.”)
The only amount allowed by state law and regulations is the per diem amount in the HRM.
Burden of Proof
Although section 440.13(7) does not directly address the burden of proof, the general rule is that “the burden of proof, apart from statute, is on the party asserting the affirmative of an issue before an administrative tribunal.” Balino v. Dep’t of Health & Rehab. Servs., 348 So. 2d 349, 350
(Fla. 1st DCA 1977).
The burden of proof for “[f]indings of fact shall be based upon a preponderance of the evidence, except in penal or licensure disciplinary proceedings or except as otherwise provided by statute, and shall be based exclusively on the evidence of record and on matters officially recognized.”
§ 120.57(1)(j), Fla. Stat. Therefore, Zenith has the burden of proving it made a proper adjustment of payment to Lawnwood’s medical bill covering the applicable dates of service.
Similarly, for an existing rule, the petitioner has the burden of proving by a preponderance of the evidence the existing rule is an invalid exercise of delegated legislated authority.
§ 120.56(3)(a); So. Baptist Hosp. at 31. Conclusion
Zenith’s adjustment was not based on the contractual language, nor was it based on the statutory amount. Therefore, it did not meet its burden proving it made a proper adjustment. The amount it paid to Lawnwood, $31,844.70, was based on an incorrect adjustment. A correct adjustment, however, does not require additional payment for reimbursement.
Zenith did meet its burden of showing the Stop-Loss formula is an invalid exercise of delegated legislative authority. Thus, the Department erred in using this formula to determine the lower amount between the contract amount and the amount allowable under the Workers’ Compensation regulations. The $110,859.24 it calculated as the “Total Correct Reimbursement Amount” in the Third Determination is impermissibly based on an invalid rule.
Based on the contractual language (“the amount payable under the terms of this Contract shall be the lesser of the
Contract rate or a 5% discount from the amount payable under hospital guidelines established under any state law or regulations pertaining to health care services rendered to
occupationally ill/injured employees” (emphasis added)), and applying the statutorily allowable per diem rate, a correct adjustment requires a total reimbursement of $10,973.44.
Because Zenith has paid more than $10,973.44, there are no grounds for granting Lawnwood’s Petition for Resolution for Reimbursement Dispute or for determining that Lawnwood is entitled to additional payment.8/
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order dismissing the petition of Lawnwood Regional Medical Center for resolution of a reimbursement dispute.
DONE AND ENTERED this 8th day of May, 2019, in Tallahassee,
Leon County, Florida.
S
HETAL DESAI
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 8th day of May, 2019.
ENDNOTES
1/ Unless otherwise indicated, all references to the Florida Statutes and Florida Administrative Code are to the 2018 versions. See Butler v. Bay Ctr./Chubb Ins. Co., 947 So. 2d 570, 572 (Fla.
1st DCA 2006) (procedural changes to law apply without regard to date of claimant’s accident); see also Avalon Ctr. v. Hardaway, 967 So. 2d 268, 271 (Fla. 1st DCA 2007) (section 440.13, Florida Statutes, is procedural in nature).
2/ The Department’s original, Amended, and Second Amended Reimbursement Dispute Determinations were calculated using the Stop-Loss formula in Florida Workers’ Compensation Reimbursement Manual for Hospitals, Chapter 5, incorporated by reference in Florida Administrative Code Rule 69L-7.501 (Stop-Loss formula). The validity and applicability of this rule is discussed in depth in the Conclusions of Law.
3/ At the conclusion of the final hearing, per the parties agreement, exhibits that had been marked and admitted during the hearing were returned to the parties for redaction of medical and other confidential information.
4/ The undersigned must accept the parties’ stipulation of facts, absent a showing of fraud, misrepresentation, or mistake. See Delgado v. Ag. for Health Care Admin., 237 So. 2d 3d 432, 436-37 (Fla. 1st DCA 2018).
5/ The Florida Workers’ Compensation Health Care Provider Reimbursement Manual defines “Maximum Reimbursement Allowance” as:
a. Maximum Reimbursement Allowance (MRA) means the specifically listed dollar amount in the scheduled adopted by the three-member panel for reimbursement of medical service(s) rendered to an injured employee by a health care provider.
6/ Zenith also urges the undersigned to require the Department to conduct an investigation into Lawnwood’s pricing practices.
Although the parties stipulated to numerous facts regarding the Department’s jurisdiction to investigate whether health care providers and carriers are each complying with the workers’ compensation laws and the rules (Jt. Stip. Fact, ¶¶ 2 - 5), section 440.13(11) does not provide any means of forcing the Department to conduct an investigation or audit. Therefore, even if Zenith has a valid claim that Lawnwood (and other hospitals)
were engaging in unreasonable pricing, the undersigned has no jurisdiction or authority to force the Department to use its auditing powers.
Zenith also tangentially raised arguments under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), sections 501.201-501.213, Florida Statutes. FDUTPA was enacted to protect the public and businesses, such as Zenith, from “unfair trade practices,” which is defined as that which “offends established public policy and . . . is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” Stewart Ag., Inc. v. Arrigo Enters., 44 Fla. L. Weekly D633 (Fla. 4th DCA March 6, 2019). This includes fraudulent pricing practices.
E.g., In re Vitamins Antitrust Litig., 2000 U.S. Dist. LEXIS 7397 (D.D.C. May 9, 2000) (holding FDTPA allowed claims by indirect purchasers for price-fixing since its primary policy goal was to protect the consuming public); Fed. Trade Comm’n v. Mylan Labs., Inc., 99 F. Supp. 2d 1 (D.D.C. 1999) (allowing restitution as a remedy under FDUTPA for allegation of excessive pricing for prescription drugs through illegal licensing agreements). The undersigned, however, has no authority to evaluate an FDUTPA claim in these proceedings.
7/ The undersigned takes official recognition of proposed legislation by the Florida House that would have amended section 440.13(12) and would have allowed the use of a Stop-Loss formula for reimbursement purposes. See CS/HB 1399, § 2 (2019) (indefinitely postponed and withdrawn from consideration on Friday, May 3, 2019; striking the per diem requirement in section 440.13(12)(a), and adding a subsection, 440.13(12)(a)7, which states: “Maximum reimbursement for inpatient hospital care shall be based on a schedule of per diem rates, subject to a stop-loss amount, approved by the panel”). The fact that an amendment to the statute is proposed to establish a stop-loss amount supports a finding that the current version of the statute does not authorize such a formula, and that the Department’s adoption of the Stop-Loss formula in the HRM exceeded the legislative authority delegated to it.
8/ Section 440.13(7) does not contemplate an overpayment by a carrier, nor could the undersigned find any authority to recommend a refund to Zenith for the additional $20,871.26 paid to Lawnwood. See generally § 440.13(7)(d), Fla. Stat. (“If the department finds an improper disallowance or improper adjustment of payment by an insurer, the insurer shall reimburse the health care provider, facility, insurer, or employer within 30 days, subject to the penalties provided in this subsection.”);
§440.13(7)(f)(limiting remedies to health care provider and not providing remedies for carrier); see also Wal-Mart, Inc. v. Dep’t of Fin. Servs., Div. of Workers’ Comp., Case No. 15-4303 (Fla.
DOAH Feb 19, 2016; Fla. DFS May 24, 2016) (finding in overutilization reimbursement case where petitioner had already made payment no refund was available; “Petitioners’ remorse at having paid in full for what in hindsight appears to have been overutilization of services, however justified, does not of itself give rise to a remedy beyond those offered by the statute. DOAH does not have authority to fashion equitable remedies. See
§ 26.012, Fla. Stat.”).
COPIES FURNISHED:
Tabitha G. Harnage, Esquire Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399 (eServed)
Ralph Paul Douglas, Esquire McConnaughhay, Coonrod, Pope,
Weaver & Stern, P.A. Suite 200
1709 Hermitage Boulevard
Tallahassee, Florida 32308 (eServed)
Thomas Nemecek, Esquire Department of Financial Services Division of Workers' Compensation
200 East Gaines Street Tallahassee, Florida 32399 (eServed)
Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| May 08, 2019 | Recommended Order | Carrier made improper adjustment, but no additional reimbursement required; Stop-Loss formula in rule 69L-7.501 not applicable pursuant to section 120.57(1)(e).
 |
